Oil prices soared in the first few hours of trading Sunday evening U.S. time, the first opportunity to react to the U.S. and Israeli attacks on Iran and the latter country’s response, with diesel prices moving higher at a faster rate than both crude and gasoline.
Such a move would be expected given the fact that the heavier crudes that are exported out of countries like Iran and Saudi Arabia, and through the possibly closed Strait of Hormuz, have a larger yield of distillates like diesel refined compared to crudes that produce a greater percentage of light ends, such as gasoline or naphtha.
At a few minutes after 7 p.m. Eastern time, ultra low sulfur diesel (ULSD) on the CME commodity exchange for the April contract, which is the first month listed, was up 24.55 cts/g to $2.8415/g, an increase of 12.84%. Later, it traded at more than $2.90/g.
Global crude benchmark Brent was up about 7.4% to $78.27/barrel for the May contract. Later it traded at more than $82/b.
RBOB gasoline, a semi-finished gasoline product that is the proxy for gasoline trading, was up 6.95%, 15.67 cts/g to $2.4104/g for the April contract.
West Texas Intermediate, the U.S. crude benchmark, had risen 7.28% to $71.90, an increase of 4.88%. That is an April contract price.
More than two-year high is in sight
If ULSD were to settle at $2.84/g, it would be the highest CME settlement since February 13, 2024, when it settled at $2.8959/g. For Brent, a settlement above $78.27/b would be the highest since $77.49/b on January 28, 2025.
The national average retail diesel price published by AAA, which is updated daily, stood at $3.761/g Sunday. That includes a $5.107/g price in California. The AAA price would not have reflected any changes as a result of the Middle East war, but is now essentially a starting point for measuring how far diesel will rise at the pump in the coming days and weeks.
The weekly average retail diesel price published by the Department of Energy/Energy Information Administration, which is the basis for most fuel surcharges, was published Tuesday, effective Monday, at $3.809/g, the sixth consecutive week the price increased.
Oil markets, which kick off on the CME commodity exchange at 6 p.m. Eastern time on Sundays and two hours later for trading in Brent on the Intercontinental Exchange, launched into an unknown world in its early trading as it tried to digest several developments in oil markets as a result of the U.S. and Israel attack on Iran and the subsequent response by that country.
Among the developments being considered Sunday by traders as a radically-different world in oil begins:
